Robbers without Cops

The dinar has been toppling on the streets of Belgrade since the middle of last week, leaving its protector Vuk Ognjanovic, Governor of the National Bank of Yugoslavia (NBY), in the lurch. On Friday afternoon, the dinar's official value did not reach even a third of the black market rate, yet throughout September the dinar's value was not only stable but ten percent lower than in August. The dinar was getting stronger.

Let us not go into why the difference now between the dinar's official and black market exchange rate is so incomparably greater than in the independent parts of former Yugoslavia (the difference in Slovenia is negligible, in Croatia and Macedonia two times less). The inhabitants of the latest Yugoslavia, since justification can no longer be found in the other republics, want to know only who is again toppling the wages in real terms, i.e. the standard, and why. The answer can be received only from the regime, the monetary and global, the federal and Serbian, since the events in Montenegro have had a marginal influence on overall trends. Monitoring the fate of the dinar, the question goes as follows: Is the regime pursuing a "black" policy and if so, to what extent does it contest with public promises.

Mr. Vuk Ognjanovic, to all intents and purposes, believed that the Constitutional provisions on the central bank's independence would be respected. The first warnings that the Constitution and laws are valid only inasmuch as it suits the ruling group at a given moment (Serbian Belgrade sent such unequivocal messages) did not stop the new governor. He embarked on what is without doubt the most important road - creating a good and healthy national currency - despite domestic and foreign obstacles, and the foreign were the result of the domestic events in former Yugoslavia. Since the serious and responsible world does not contend that by far the best regime for a country's population, its stability and prosperity, is one which creates and maintains a healthy national currency, Governor Ognjanovic appears as not only the banker but (and this is more important at the moment) as an advocate of democracy in the best and original meaning of the word.

This same serious and responsible world carries not illusion that the world of money is the best of all possible worlds, but neither does it labor under the misapprehension that the rule of money can be abandoned before a better and more just mechanism is discovered. Ever attempt to desert the policy of a healthy national currency and separating it from world currencies, be it in a fascist, communist or some third regime, was always reduced to manipulating with the people unfortunate enough to be in that regime. Protecting healthy money, as the most objective known measure of everybody's labor, is a process with no end even in happier countries. This can be deduced from the message of the U.S. dollar's best keeper Paul Walker that money should above all be protected from politicians, because they as a rule are apt to promise more than they can do.

What is it that Vuk Ognjanovic and the NBY's Council of Governors did to evoke, in such a short time, first verbal warnings and then an official list of demands from the Serbian Government? The central bank's top people increased the commercial banks' reserves, withdrew the unused credits from the primary issue, started to strictly control the spending of approved credits and budgets, and organizationally joined the Topcider mint to the central bank - in short, started to introduce order and intimate a moderate, restrictive monetary policy.

It is another matter how successful such a policy could be in the current systemic conditions, primarily because of the frozen relations with the leading world financial institutions and the social property that has pulled through in the new Yugoslavia, but it is definite that the August and September's galloping inflation could never have been checked were it not for these moves by the central bank. The accusations that the central bank's policy caused a lack of ready money have little or nothing to do with reality. The fact that galloping inflation is still topical is being omitted, either on purpose or in ignorance (there are more and more serious indications that Serbian statistics are lagging behind the real price rises), then that almost all methods of payment have been abandoned except cash, and finally, that several banks drew in an abnormal amount of ready money with spectacularly high monthly dinar interest rates, which then surfaced on the hard currency black market.

The latter is one reason why the hard currencies had been rising with such speed on the black market last week. On Monday, the central bank issued agricultural loans in fresh money, but there is still no proof that this was a case of pouring oil on troubled waters, since the credits were approved under much stricter conditions than the ones requested by Serbia's economic authorities. A psychological effect is possible, i.e. anticipation that this is the beginning of the end of the relatively restricted monetary policy.

One can understand the expectations that the central bank is going to "go bust", if one bears in mind that it is constantly being threatened by Serbian Belgrade. The latest threat came last week in the form of a petty-political melange of a polished public word and a letter-ultimatum by the Serbian Government and Parliament "to the Federal Government and the National Bank of Yugoslavia to urgently prepare, discuss and adopt the following measures of a macroeconomic policy". Everything that the Serbian Government demands is infinitely closer to a macroeconomy than a microeconomy, in other words it is reduced to the eternal printing of the increasingly worthless dinar. The last part of the longish list of demands concerns agriculture, and ends in the following message: "By pointing out that the seasonal agricultural work cannot be delayed, the Government of the Republic of Serbia will, should the federal bodies fail to reach the required decisions, be forced to take corresponding steps in keeping with Article 135 of the Constitution of the Republic of Serbia in order to prevent damage on a larger scale".

Only the idle will go to the trouble of finding out what is written in the cited article of the Serbian Constitution. And only the naive, or those with short memories, will believe that the Serbian President, Prime Minister and Speaker of the Parliament are truly eliminating the indisputable problems in agriculture. The same trick was pulled in the Ante Markovic Government, only then the farmer had a standard as never before, despite the fact that the same but differently distributed tricksters waylaid for themselves a good part of the money on its journey from the federal vaults to the farmer. Why should anything be different when rare is the pickpocket who voluntarily abandons his lucrative job, especially if he has the power to send gendarmes to the black market and from time to time (just to keep the plebs happy) to a seemingly bigger fish.

There was suspicion of all this even before the Serbian government made its ultimatum to the federal government and the central bank. On Tuesday, the Serbian president, thanking his Prime Minister for inviting him to a Government session, clearly said that the monetary policy must not choke production. For the last five decades, this has been the password for printing unsecured funds. President Milosevic, if one deduces indirectly, supported also in advance the ultimatum which Mr. Bozovic and Mr. Bakocevic were to send two days later to the federal bodies. Mr. Milosevic frowned on Mr. Bozovic for causing shortages of certain foodstuffs by overly choking prices, at the same time expressing concern for the people and preserving the market economy, but globally supported his government's work - and therefore also the robbery which has euphemistically been described as "an incursion into the country's payment operations system", of either former or present Yugoslavia.

Mr. Milosevic's appearance perhaps deserves more attention than merely citing the main message - in fact the attention worthy of an intimated close to a five-year-long period in power. He was definitely confusing. First it seemed that it was your president speaking, and then you could not pinpoint whether it was the prime minister or a cabinet minister, the internal affairs one, for instance. He was also contradictory. First he presented Yugoslavia's disintegration as good for Serbia, and then claimed that Serbia's economic troubles resulted from the interrupted former Yugoslav economic ties... Did he devote so much time to social and economic topics in fear of the price that is about to be paid?

All in all, the regime in Serbia is still looking for all possible ways to survive, by itself, in conditions of international isolation; the sanctions, which are the fruit of the world's conspiracy against the dignified and patriotic Serbian leadership, are the cause of all hardships. If the majority is still gullible enough to swallow this, then there is really no call to split hairs over any Vuk (wolf). There will be more sheep. And bleaters.